EXHIBIT 10.1
DEVELOPMENT AGREEMENT(1)
This Development Agreement ("Agreement"), dated as of March 30, 2005 (the
"Agreement Date"), is between M-Systems Flash Disk Pioneers Ltd., an Israeli
company having its principal place of business at Central Park 2000, 7 Atir ▇▇▇▇
▇▇., ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇ ("M-Systems"), and PowerHouse Technologies Group,
Inc., a Delaware corporation having its principal place of business at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ("PowerHouse"). M-Systems and
PowerHouse may be referred to individually as a "Party" or collectively as
"Parties".
1. INTRODUCTION
1.1. PowerHouse is engaged in the development of mobile computing
software;
1.2. M-Systems has developed and sells a "flash based" key chain
storage device known as the DiskOnKey(R) ("DiskOnKey");
1.3. M-Systems desires PowerHouse to perform certain development work
to modify technologies of PowerHouse to operate in and in
conjunction with M-Systems USB Drives (as such term is defined
below); and
1.4. M-Systems further desires to receive and PowerHouse desires to
grant to M-Systems the right to use and distribute the Migo
Products (as such term is defined below) to be used in, together
and in conjunction with M-Systems USB Drives subject to the terms
and conditions of this Agreement.
ACCORDINGLY, in consideration of the mutual covenants and promises
contained herein, the Parties agree as follows:
2. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
2.1. Associated Company means any corporation, company or other legal
entity, where more than fifty percent (50%) of the voting power of
which is, now or hereafter, owned or controlled, directly or
indirectly by a Party hereto, or jointly by the Parties hereto;
provided, however, that any corporation, company or other legal
entity shall be an Associated Company of a Party only for as long
as such ownership or control exists.
2.2. Intellectual Property Rights means rights in patents (including
reissues, divisions, continuations, continuation-in-part, and
extensions thereof), utility models, and registered and
unregistered designs including copyrights, trade secrets and any
other form of protection afforded by law to inventions, models,
designs or other Information, and applications therefor including
without limitation, patents, trademarks, copyrights and trade
secrets relating to the Development Projects and that are: (i)
owned or controlled by a Party or an Associated Company, and (ii)
exist prior to the beginning of the Development hereunder or
result from activities that are independent from said Development,
and (iii) developed by each party pursuant to this Agreement in
the course and as part of the Development Project. PowerHouse's
Intellectual Property Rights includes without limitation all
PowerHouse Technology. M-Systems' Intellectual Property Rights
includes without limitation all M-Systems Technology.
(1) Legend: In this document, [*] connotes material that has been omitted
pursuant to a request for confidential treatment of the same. Such omitted
material has been filed with the Securities and Exchange Commission on a
confidential basis.
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2.3. Business Day means any day other than a Saturday, a Sunday or any
day, which is otherwise an official bank holiday in the United
States of America.
2.4. Confidential Information means all Information disclosed to one
Party by the other Party that is marked or designated Confidential
or Proprietary or, in the case of verbal disclosures, which are
summarized in a writing, marked or designated Confidential or
Proprietary and furnished within thirty days to the Party
receiving such Confidential Information; provided that the lack of
such summary in writing shall not derogate from the qualification
of oral information as a Confidential Information hereunder.
2.5. Development Projects means the development work to be performed by
each Party in accordance with the work allocation and time
schedule as set forth in a Statement of Work, and any mutually
agreed modifications or extensions thereof, with the aim to
develop Software Applications, as defined below.
2.6. Escrow Agent shall mean such party as agreed upon between the
parties.
2.7. Escrow Agreement shall mean a separate agreement to be executed by
PowerHouse, M-Systems and the Escrow Agent in the form attached
hereto as Exhibit E, which agreement shall embody the appropriate
escrow terms for deposit of the Source Code.
2.8. Information means circuits, protocols, drawings, specifications,
samples, models, processes, procedures, instructions, technology,
applied development engineering data, reports, and all other
technical or commercial information, data and documents excluding
any Intellectual Property Rights related to such Information,
which is (i) owned or controlled by a Party, and existing prior to
the beginning of the Development under this Agreement, or (ii)
resulting from activities of a Party that are independent from the
Development under this Agreement or (iii) developed as part of and
in the course of the Development Projects.
2.9. Migo Personal shall mean the Migo USB Drive software product
offered by PowerHouse as of the Agreement Date for all currently
supported platforms and all currently provided functionality, with
the exception of the Outlook synchronization feature. The Migo
Personal shall contain an upgrade mechanism which shall be defined
by both parties and fully managed and operated by PowerHouse;
provided, however, that the upgrade mechanism will permit upgrade
only to the same Migo software and functionality as Migo
Professional.
2.10. Migo Products shall mean the Migo Personal, the Migo Professional
and/or the Migo Upgrade.
2.11. Migo Professional shall mean the Migo USB Drive software product
offered by PowerHouse as of the Agreement Date for all currently
supported software platforms and all currently provided
functionality, including the Outlook synchronization feature.
2.12. Migo Upgrade shall have such meaning as described in Section 3.3.
2.13. M-Systems Customers shall mean purchasers or licensees of
M-Systems USB Drives and/or technology, as relevant, whether
labeled under M-System's name or under M-Systems partners',
resellers' or OEM's names.
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2.14. M-Systems Technology shall mean, without limitation, DiskOnKey
designs and technology (as more fully described in Exhibit A).
2.15. M-Systems USB Drives shall mean USB Drives manufactured by or on
behalf of M-Systems or by its Associated Companies, partners,
resellers or OEM's utilizing the M-Systems Technology.
2.16. PowerHouse Technology shall mean the technology described in
Exhibit B.
2.17. Statement of Work means a plan for the Development Projects under
this Agreement as set out in the Product Development Plan and
includes product specifications, a development schedule,
deliverables, acceptance criteria.
2.18. U3 shall mean U3 LLC, a Delaware limited liability company under
authorization of the members of U3 Group, which includes M-Systems
and SanDisk Corporation, and has developed a next generation USB
flash drive technology.
2.19. U3 Drives shall mean a USB Drive which complies fully with the U3
specifications.
2.20. U3 Software shall mean software products, solely to the extent
such software products run on a U3 Drive, where such software
products comply with all portions of the Software and U3 Related
Products Agreement to be entered into by a software provider and
U3.
2.21. USB Drive means any removable data storage products comprised of a
non-detachable fixed USB connector (i.e., not connected via a
cable of any length) and embedded flash, or other, memory for data
storage, contained within a single integrated shell package.
2.22. Migo ▇▇▇▇ means the End User License Agreement included with each
Migo Product.
3. BUSINESS COLLABORATION
M-Systems shall promote the Migo Products in accordance with the
following guidelines:
3.1. PowerHouse will develop the Migo Products and will adapt them to
run as U3 Software in accordance with U3 guidelines and pursuant
to the terms of the Software and U3 Related Products Agreement to
be entered into by PowerHouse and U3.
3.2. PowerHouse hereby grants M-Systems and its Associated Companies a
worldwide, transferable license to market, distribute, promote,
offer for sale, offer for re-sale and sell the Migo Products as an
integrated part of M-Systems USB Drives only, and to use and
display the trademarks, names, service marks, and logos of
PowerHouse related to the Migo Products or in connection with such
M-Systems USB Drives only. [*]
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3.3. [*]
3.4. M-Systems, to the extent commercially practicable, will promote
the Migo Upgrade as the primary Migo Product to M-Systems
Customers. Furthermore, M-Systems will actively promote
PowerHouse's interests with M-Systems' Customers, aiming at
allowing PowerHouse to market its Migo Product upgrades directly
to M-Systems' Customers end-user base. PowerHouse will provide
M-Systems with its recommended marketing messages in order to
promote the bundling of the Migo Products with the M-Systems USB
Drives.
3.5. PowerHouse will make such changes to the trademark labeling
included in the Migo Products as an M-Systems Customer reasonably
deems necessary for such M-Systems Customer to promote the Migo
Products. M-Systems Customers' promotional and packaging materials
which include the Migo brand name must be submitted to PowerHouse
for approval, which approval shall not be unreasonably withheld.
3.6. PowerHouse will provide first level support for all Migo Products
directly to M-Systems and M-Systems Customers and their end-users,
for 30 days from the date of the first use of the software by the
end user. With respect to any M-Systems Customer who chooses to
provide first level support itself to its end-users, PowerHouse
will provide training and second level support as may be required
by such M-Systems Customer and accepted by PowerHouse. PowerHouse
will provide training 3 times per year at PowerHouse's location.
If the training is requested at other locations, there will be
charges associated with the training in amounts determined by
PowerHouse and which will be borne by the M-Systems Customer. In
the case where PowerHouse is providing the level-1 support, if it
is determined that the problem is not related to Migo Products,
M-Systems will pay PowerHouse for providing such first line of
support. A process and the fee structure will be established prior
to the product launch. Without derogating from the preceding
sentence, PowerHouse shall provide M-Systems and M-Systems
Customers with such upgrades, features, technical support and
maintenance services as it provides to its other customers
generally and without special negotiation of terms and conditions.
Upgrades for this purpose shall be considered fixes and
enhancements to the existing product and will not include new
features or functionality that may be marketed and sold by
PowerHouse as value added products.
3.7. Exclusivity.
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3.7.1. Other than for those customers and with respect to
those products listed next to their names in Exhibit F, during the
Term of this Agreement, PowerHouse shall not provide any other
party and any other party's customers with services or
applications for USB Drives provided or similar to those provided
to M-Systems Customers as set forth in this Agreement, and shall
not bundle, or allow to be bundled. The Migo Products (or
variations thereof) with any other USB Drive other than M-Systems'
USB Drives. Exhibit F may be amended upon the mutual written
agreement of the parties.
Notwithstanding anything to the contrary contained elsewhere in
this Agreement or any exhibit or schedule hereto, the exclusivity
set forth above shall not be deemed to restrict or limit in any
manner the full and complete right of PowerHouse to market, sell,
license and distribute Migo Products:
(a) for use in connection with (1) MP3 players, (2)
Cell/smart phones, (3) PDAs, (4) SIM cards, (5) USB
watches and/or (6) memory cards in devices marketed
by PowerHouse or others (other than standalone USB
Drives), if PowerHouse offers M-Systems a 30-day
right of first refusal to acquire the rights for any
such device on the terms offered to the first third
party acquiring rights for any such device from
PowerHouse and M-Systems does not exercise such
right; and
(b) to PowerHouse customers who or which acquire Migo
Products (including USB Drives on which Migo
Products are installed) directly from PowerHouse.
3.7.2. For the avoidance of any doubt M-Systems shall be
entitled in its sole and absolute discretion to market and sell
the M-Systems USB Drives, either directly or indirectly, without
the Migo Products, and, except as expressly provided herein,
PowerHouse shall have no right or claim under this Agreement or
otherwise for loss of profit, loss of revenues or the like.
3.8. Beginning on the date (the "English Language Start Date") which is
two months after the Migo Products have been approved for English
Language Gold Release pursuant to section 4.5, M-Systems shall
bundle with M-Systems USB Drives [*].
Beginning on the date (the "International Start Date") which is
the date on which Migo Products have been approved for
International Gold Release pursuant to section 4.5 (a) the
schedule in the preceding sentence shall no longer be applicable
and the following schedule shall apply:
(a) [*]
(b) [*]
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(c) [*]
In the event the M-Systems fails to meet the commitment in this
Section 3.9 and does not cure such failure after 30 days written
notice, the exclusivity provisions in Section 3.8 shall cease
until such time as M-Systems meets the commitment herein.
3.9. [*]
Notwithstanding anything to the contrary contained elsewhere in
this Agreement or any exhibit or schedule hereto, the restrictions
and price adjustments set forth above shall not be deemed
applicable to or with respect to any sales or licenses of Migo
Products:
(a) for use in connection with (1) MP3 players, (2)
Cell/smart phones, (3) PDAs, (4) SIM cards, (5) USB
watches and/or (6) memory cards in devices marketed
by PowerHouse or others (other than standalone USB
Drives), if PowerHouse offers M-Systems a 30-day
right of first refusal to acquire the rights for any
such device on the terms offered to the first third
party acquiring rights for any such device from
PowerHouse and M-Systems does not exercise such
right; and
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(b) to PowerHouse customers who or which acquire Migo
Products (including USB Drives on which Migo
Products are installed) directly from PowerHouse.
4. DEVELOPMENT
4.1. The parties will appoint technical representatives to coordinate
technological cooperation between the parties (the "Technical
Team"). The Technical Team will be responsible for discussing and
overseeing the integration between Migo Products and M-Systems USB
Drives.
4.2. PowerHouse and M-Systems will disclose to each other Information
to the extent necessary for implementing Development Projects in
accordance with a Product Development Plan. The Product
Development Plan and any amendments thereof, once mutually agreed
upon by the Parties will be incorporated by reference into this
Agreement as an Addendum and shall constitute a part hereto. The
initial Product Development Plans is attached as Exhibit C of this
Agreement.
4.3. The specific goal of the Development Project is to develop
software applications required to bundle the Migo Products with
M-Systems USB Drives and to provide M-Systems Customers with the
Migo Products as set forth herein (the "Software Applications").
4.4. In implementing Development Projects, PowerHouse and M-Systems
will cooperate fully to accomplish the work allocated to each
party within the time schedule as set forth in the Product
Development Plan. The parties acknowledge that the time schedules
of a Statement of Work in a Product Development Plan are best
estimates as of the time of its preparation and, unless otherwise
agreed in writing, neither Party shall be liable for any delays in
accomplishing the development work therein. Each of PowerHouse and
M-Systems will be responsible for their respective development
responsibilities and bear its own development costs, in accordance
with a Product Development Plan. Each Party will complete its
development responsibilities and achieve its milestones in
accordance with the schedule. For each day a Party is late in
achieving a milestone, then the deadlines for the other Party's
outstanding milestones will be extended one day. If for any reason
the development does not proceed in accordance with the schedule,
either Party may request a meeting to discuss the delay. If such a
meeting is requested, the Parties shall meet and discuss in good
faith mechanisms to expedite development and avoid further delays,
and will make necessary adjustments to the Product Development
schedule.
4.5. Without derogating from the preceding section, it is the intent of
the parties that PowerHouse shall deliver a final (post QA) U3
compliant version of each of the Migo Products by no later than 3
weeks following release of final U3 LaunchPad software. M-Systems
shall confirm to PowerHouse when each Migo Product has passed
M-Systems' internal acceptance tests and is U3 compliant. Versions
M-Systems approves for release shall be known as "Gold Releases".
Initially, the Migo Products will be prepared for release in the
English Language (the "English Language Gold Release"). The
English Language Gold Release shall be completed by no later than
3 weeks following release of final U3 LaunchPad software.
Subsequently, a version
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will be prepared for international release in English, French,
German, Italian and Spanish Languages (the "International Gold
Release").
4.6. Each Party shall be responsible for its respective expenses and
liabilities arising in connection with the Development Project(s)
including any travel or other expenses incurred by employees of
that Party in connection therewith.
5. REFERRAL FEE
5.1. [*]
6. AUDIT RIGHTS
6.1. Exchange of Report; Audit Rights. Within no later than 30 days
after the end of each month, each party shall provide the other
with a written report in the form attached as Exhibit D of this
Agreement and which will include the calculation of all Referral
and License Fees due to the other, as applicable. PowerHouse's
written report shall include a breakdown of upgrades per M-Systems
Customer. Based on the report each party shall invoice the other
for the Referral or License Fees, as applicable ("Invoice"). If
the Parties do not agree with any of the reports, the Parties will
use all reasonable efforts to settle disputes by mutual agreement.
If any dispute is not so settled, the disputing party may exercise
its right to audit as set forth in sub-section 6.5 below. In the
event such audit verifies an underpayment error, the audited party
shall promptly pay the auditing party for the full amount of any
underpayment verified in the audit. Any such discrepancy
discovered as a result of such audit, will be reflected in the
following report and rectified and payment shall be made net
within 30 days from receipt of audit report.
6.2. Payment of Referral and License Fees. Referral Fees based on
upgrades through the Custom Landing Page shall accrue upon each
successful download of the upgrade. Such Referral Fee shall be
non-refundable regardless of the length of subscription to such
upgrade. Payment of Referral and License Fees shall be made by the
relevant party net within thirty (30) days of the Invoice. If
there is any discrepancy in the report for any month, as described
in Section 6.1, any required reconciliation in payments shall be
made within 15 Business Days of the resolution of any disputes.
6.3. Late Payments. Payments not received in accordance with this
Section 6 shall be subject to a late payment charge of one and
one-half percent (1.5%) per month or the highest amount permitted
by law, whichever is less, commencing on the date such payment
became due.
6.4. Taxes. All fees payable by one party to the other under this
Agreement are on an exclusive basis and do not include all current
and future applicable taxes and duties, including, but not limited
to, Value Added Tax, sales tax, if applicable to such payments,
which shall be added to such fees, or paid directly by the party
paying such fees, as applicable. Notwithstanding the aforesaid,
any income or other tax which a party is required by law to pay or
withhold on behalf of the other party with respect to any amounts
payable to such other party under this Agreement may be deducted
from the amount of
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payments, provided, however, that in regard to any such deduction,
the deducting party shall upon request furnish to the other party
such certificates and other evidence of deduction and payment
thereof as such other party may properly require. Stamp tax, if
any, shall be borne equally by the parties.
6.5. Each party shall keep complete and accurate records pertaining to
any license fee pursuant to Section 3.2 or upgrade purchased
pursuant to Section 3.3, as relevant, which will be sufficient to
verify full compliance with this Agreement. Each party shall be
entitled to have the books and records of the other party audited
by one of the "nationally recognized independent public
accountants qualified under PCAOB guidelines". Any such audit
shall be conducted during normal business hours and shall include
the right to review and copy all records that contain information
bearing upon the audited party's compliance with the terms of this
Agreement. Such records shall be maintained for at least five
years after their date of creation. The cost of such audit shall
be paid by the auditing party provided that if the audit shows an
underpayment of more than 5% by the audited party, the audited
party shall bear the costs of such audit.
7. INTELLECTUAL PROPERTY RIGHTS
7.1. Ownership. PowerHouse owns the PowerHouse Technology and the
PowerHouse Intellectual Party Rights. M-Systems owns the M-Systems
Technology and the M-Systems Intellectual Property Rights. Without
derogating from the preceding sentences, to the extent that any
improvements are made in the course of development of the Software
Applications to either M-Systems Technology or PowerHouse
Technology, such improvements shall be owned solely by the party
who owns the relevant Technology.
7.2. No Implied Licenses. No license or right is granted by either
Party to the other, by implication or by estoppel, or otherwise to
any patents, inventions, or other property right, other than the
licenses and rights expressly granted in this Section.
8. CONFIDENTIAL INFORMATION
8.1. Each Party agrees not to use Confidential Information disclosed to
it by the other Party for its own use or for any purpose except
the Development Projects as set forth in this Agreement.
Confidential Information shall not be disclosed to third parties
or to either Party's employees or consultants except employees or
consultants who are required to have the Confidential Information
in order to carry out the Development Projects, management
associated with the employees carrying out the Development
Projects, attorneys and accountants, and senior management of the
Parties, provided that such parties are subject to written
confidentiality obligations. Each Party agrees that it will take
all reasonable steps which are customary in the industry in which
the Parties operate to protect the secrecy of and avoid disclosure
or use of Confidential Information in order to prevent the
Confidential Information from falling into the public domain or
the possession of unauthorized persons. Each Party agrees to
notify the other
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Party in writing of any misuse or misappropriation of Confidential
Information which may come to the Party's attention.
8.2. The confidentiality obligations imposed under Section 8.1 shall
not apply to Information which:
8.2.1. is generally available to the public prior to disclosure
under this Agreement; or
8.2.2. is generally known to the receiving Party prior to the
disclosure under this Agreement as evidenced by written and
dated material; or
8.2.3. through no fault of the receiving Party becomes part of the
public domain after disclosure under this Agreement; or
8.2.4. is disclosed to the receiving Party by any third party
having a bona fide right to do so; or
8.2.5. is approved for release by the written authorization of the
disclosing Party; or
8.2.6. is disclosed pursuant to the requirement of a government
agency or by operation of law after the disclosing Party
has been given at least thirty (30) days notice and an
opportunity to object to such disclosures.
8.2.7. is independently developed by the receiving Party without
use of the disclosing Party's Confidential Information.
8.3. Each Party shall immediately notify the other Party of any private
or governmental request for the Confidential Information or any
other information or documents relating to this Agreement.
8.4. Each Party shall have the right to participate in any other
Party's response to any such request. In the event that a Party
receives any subpoena or other legal process requiring the
production of information, documents, data, work papers, reports,
or other materials relating to Confidential Information or to this
Agreement, then the Party shall:
8.4.1. give the other Party, if possible, the opportunity to
participate in quashing, modifying, or otherwise responding
to any compulsory process in an appropriate and timely
manner; and
8.4.2. cooperate fully with the other Party's efforts to narrow
the scope of any such compulsory process, to obtain a
protective order limiting the use or disclosure of the
information sought, or in any other lawful way to obtain
continued protection of the Confidential Information.
8.5. If either Party becomes aware of the loss, theft, or
misappropriation of the other Party's Confidential Information
which is in its possession, such Party shall notify the other
Party in writing within ten (10) Business Days of its discovery of
the loss, theft, or misappropriation of such Confidential
Information.
9. TERM AND TERMINATION
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9.1. This Agreement shall have a term [*] and may not be terminated for
the convenience of either Party. However, either Party may
terminate this Agreement in the event of a breach or default by
the other Party (the "breaching Party"). The Party alleging a
breach or default (the "non-breaching Party") shall provide a
written notice of termination to the breaching Party specifying
the facts and circumstances relating to the alleged breach or
default as set forth above; provided; however, that this Agreement
shall not be terminated if the specified breach or default is
remedied or cured within thirty (30) days after notice of breach
or default is provided. If such specified breach or default is not
remedied or cured within thirty (30) days after notice of breach
or default is provided, and the breaching Party does not dispute
that it has breached or defaulted and that the breach or default
is material, then termination shall take effect upon expiration of
the thirty-day period. Notwithstanding anything to the contrary in
this Section 9.1, breaches for non-payment of any fees due and
payable must be cured within 10 days of notice of such breach.
9.2. If at any time during the term of this Agreement, (i) a Party
becomes insolvent; or (ii) a Party admits in writing its
insolvency or inability to pay its debts or perform its
obligations as they mature; or (iii) a party becomes subject to
any voluntary or involuntary proceedings in bankruptcy,
liquidation, dissolution, receivership, attachment or composition
or general attachment for the benefit of creditors, provided that
if such condition is assumed involuntarily it has not been
dismissed with prejudice within thirty (30) days after it begins;
the other Party may terminate this Agreement upon thirty days
advanced written notice.
9.3. In the event of termination of this Agreement by either Party,
each Party shall immediately discontinue use of the Confidential
Information received from the other Party, and within five (5)
days after termination, each Party shall provide to the other
Party a certification that the originals and all copies of such
Confidential Information, regardless of form, have been returned
to the disclosing Party or else destroyed.
9.4. Sections 5, 6, 7, 8, 9.4, 10, 11, 12 and 13 shall survive the
termination of this Agreement for any reason whatsoever.
10. LIABILITY AND INDEMNITY
10.1. Each party shall, at its own expense, indemnify, defend and hold
the other party and its Associated Companies ("Indemnified
Parties") harmless from any and all claims, allegations, demands,
liabilities, losses, damages, awards, judgments or settlements,
including all reasonable costs and expenses related thereto
including attorney's fees ("Claims"), that may be asserted,
granted, imposed or brought against any Indemnified Party directly
arising from or in connection with any Claims that the
indemnifying party's technology or products infringe any
copyright, patent, trade ▇▇▇▇, trade secret or other intellectual
property right.
10.2. As between M-Systems, PowerHouse and each M-Systems Customer,
M-Systems will not be responsible for anything related to the Migo
Products or of any losses, damages or expenses incurred by
M-Systems Customers in
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connection with the use of the Migo Products. PowerHouse shall be
the sole party responsible for such losses damages or expenses.
10.3. As between M-Systems, PowerHouse and each M-Systems Customer,
PowerHouse will not be responsible for anything related to the
products or technology of M-Systems or of any losses, damages or
expenses incurred by M-Systems Customers in connection with the
use of the M-Systems products or technology. M-Systems shall be
the sole party responsible for such losses damages or expenses.
10.4. PowerHouse shall, at its own expense, indemnify, defend and hold
M-Systems and its Associated Companies harmless from any and all
Claims, that may be asserted, granted, imposed or brought against
M-Systems and its Associated Companies arising from or in
connection with any Claims brought by M-Systems Customers in
connection with the Migo Products, excluding claims for loss of
data or loss of profits.
10.5. M-Systems shall, at its own expense, indemnify, defend and hold
PowerHouse and its Associated Companies harmless from any and all
Claims, that may be asserted, granted, imposed or brought against
PowerHouse and its Associated Companies arising from or in
connection with any Claims brought by third parties in connection
with the M-Systems products, excluding claims for loss of data or
loss of profits.
11. REPRESENTATIONS AND WARRANTIES
11.1. PowerHouse represents and warrants that it has all the rights
necessary to enter into this Agreement and to perform its
obligations hereunder.
11.2. PowerHouse represents and warrants that to the best of its
knowledge it has all necessary rights in, and to, all copyrights,
patents and other proprietary rights associated with the
PowerHouse Technology.
11.3. M-Systems represents and warrants that it has all the rights
necessary to enter into this Agreement and to perform its
obligations hereunder.
11.4. M-Systems represents and warrants that to the best of its
knowledge it has all necessary rights in, and to, all copyrights,
patents and other proprietary rights associated with the M-Systems
Technology.
11.5. Warranty Disclaimers. EXCEPT AS EXPRESSLY WARRANTED IN THIS
AGREEMENT, THE PARTIES DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, ORAL OR WRITTEN, INCLUDING, WITHOUT LIMITATION, (A) ANY
WARRANTY THAT THE ANY TECHNOLOGY IS ERROR-FREE, WILL OPERATE
WITHOUT INTERRUPTION, OR IS COMPATIBLE WITH ALL EQUIPMENT AND
SOFTWARE CONFIGURATIONS; (B) ANY WARRANTY OF MERCHANTABILITY; AND,
(C) ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. NEITHER
PARTY IS LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING THE LOSS OF PROFITS,
REVENUE, DATA, OR USE OR COST OF PROCUREMENT OF SUBSTITUTE GOODS
INCURRED BY ANY PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN
CONTRACT OR TORT OR BASED ON A WARRANTY, EVEN IF ANY
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PARTY OR THIRD PARTY HAS ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
11.6. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, IN NO EVENT SHALL EITHER PARTY'S LIABILITY TOWARDS THE
OTHER PARTY CAUSED BY ANY BREACH OF ANY WARRANTY IN THIS AGREEMENT
EXCEED THE GREATER OF (i) THE AGGREGATE CONSIDERATION PAYABLE BY
M-SYSTEMS TO POWERHOUSE HEREUNDER; OR (ii) US$ 1,000,000.
12. SOURCE CODE ESCROW
12.1. The Parties agree to appoint within sixty (60) days of the date
the software applications are delivered pursuant to the Statement
of Work an Escrow Agent or such other escrow agent as is a
mutually acceptable and to execute the Escrow Agreement.
12.2. The parties agree that the Escrow Agent must be independent and
located outside of the USA and Israel.
12.3. M-Systems and PowerHouse acknowledge and accept the terms of the
Escrow Agreement and agree on behalf of themselves to be bound by
the provisions therein.
12.4. Any breach of this Section 12 by the Parties shall be considered a
material breach of this Agreement.
12.5. If the Deposit Materials, as defined in the Escrow Agreement, are
not deposited with the Escrow Agent according to the terms of the
Escrow Agreement within ten (10) days from the Agreement Date
(provided that the Escrow Agreement was signed during such
period), M-Systems shall have the right to terminate this
Agreement forthwith without any liability and without limitation
to any other rights M-Systems may have.
12.6. Without limitation to any terms of the Escrow Agreement,
PowerHouse shall, within thirty (30) days of the date of signature
of the Escrow Agreement, provide to the Escrow Agent one copy of
the Deposit Materials and shall thereafter during the term of this
Agreement, simultaneously with the delivery of Updates to
M-Systems, also provide to the Escrow Agent in source code format
(1) copy of such Update.
12.7. The Escrow Agent will deliver the Deposit Materials to M-Systems
only under the circumstances defined in the Escrow Agreement.
12.8. The costs of the Escrow Agent shall be borne by M-Systems.
12.9. The provisions of the Escrow Agreement shall survive the
termination or expiration of this Agreement regardless of the
reasons therefor, and shall terminate upon termination of the
Escrow Agreement according to its terms.
13. GENERAL PROVISIONS
13.1. Choice of Law. This Agreement shall be construed under, and
interpreted in accordance with, the laws of the State of
California and of the United States of America without giving
effect to the principles of conflicts laws. In the event of any
lawsuit or other proceeding to enforce the provisions of this
Agreement, the prevailing Party shall be entitled to recover its
reasonable
Page 13
attorney's fees and expenses. Whenever possible, each provision of
this Agreement will be interpreted so as to be effective and valid
under applicable law, but if any provision is held to be invalid
under applicable law, either in whole or in part, the provision
will be ineffective only to the extent of such invalidity, and the
remaining provision of this Agreement shall remain in full force
and effect. The failure by either Party to enforce any of the
terms and conditions of this Agreement shall not constitute a
waiver of such Party's right thereafter to enforce that or any
other terms and conditions of this Agreement.
13.2. Limitation on Liability. Neither Party shall be liable to each
other in contract, tort or otherwise, whatever the cause thereof,
for any loss of profit, business or goodwill or any indirect,
special, consequential, incidental or punitive cost, damages or
expense of any kind, howsoever arising under or in connection with
this Agreement.
13.3. Assignment. Neither M-Systems nor PowerHouse shall assign any of
its rights or privileges hereunder without the prior written
consent of the other party, such consent not to be unreasonably
withheld.
13.4. Independent Contractors. The relationship of M-Systems and
PowerHouse shall be that of independent contractors. There is no
relationship of agency, partnership, joint venture, employment or
franchise between the Parties. Neither Party has the authority to
bind the other or to incur any obligation on behalf of the other
Party or to represent itself as the other's agent or in any way
that might result in confusion as to the fact that the Parties are
separate and distinct entities.
13.5. Non-Solicitation. Each of PowerHouse and M-Systems agree that
during the term of this Agreement, and for a period of 12 months
thereafter, it shall not induce or solicit any employee of the
other or its Associated Companies to leave his or her employment
therewith.
13.6. Notices. All communications relating to and notices required under
this Agreement shall be directed as:
Communications and Notices to PowerHouse:
PowerHouse Technologies Group, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇
Attn: General Counsel
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
Communications and Notices to M-Systems:
M-Systems Flash Disk Pioneers Ltd.
Central Park 2000, 7 Atir ▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇
Attention: General Counsel
Fax: ▇▇▇-▇▇▇-▇-▇▇▇-▇▇▇▇
Unless specifically set forth otherwise, all notices or
communications of any kind made or required to be given pursuant
to this Agreement shall be in writing and delivered to the other
Party at the address set forth above, unless either Party gives
notice to the other party of a change of address. All notices or
communications shall be made by hand delivery, established
overnight courier service, facsimile or prepaid certified mail
return receipt
Page 14
requested. Notices shall be deemed delivered upon receipt if
delivered by hand, overnight courier service or facsimile, or five
Business Days after dispatch if by certified mail.
13.7. Integration. This Agreement contains the entire agreement of the
Parties. No promise, inducement, representation or agreement,
other than as expressly set forth herein, has been made to or by
the Parties hereto. All prior agreements and understandings
related to the subject matter hereof, whether written or oral,
including without limitation the LOI, are expressly superseded
hereby and are of no further force or effect.
13.8. Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of PowerHouse and M-Systems, and their respective
Associated Companies.
13.9. Publicity. Neither party shall issue any press release relating to
this Agreement or the transactions contemplated hereby without
prior notice to, consultation with, and the consent of the other
party. Concurrently with the execution of this Agreement, the
Parties shall issue a joint press release to be mutually agreed
upon.
13.10. Amendment. This Agreement cannot be altered, amended or modified
in any respect, except by a writing duly signed by both Parties.
13.11. No Strict Construction. The normal rule of construction to the
effect that any ambiguities are to be resolved against the
drafting Party shall not be employed in the interpretation of this
Agreement. The headings contained in this Agreement are intended
solely for ease of reference and shall be given no effect in the
construction of interpretation of this Agreement.
13.12. Execution. This Agreement may be executed in counterparts by the
Parties, each of which shall be deemed an original, and which
together shall constitute one and the same instrument, having the
same force and effect as if a single original had been executed by
all the Parties.
13.13. Currency. All payments required under this Agreement shall be made
in the currency of the United States of America.
13.14. Jurisdiction. Any litigation arising out of or relating to this
Agreement shall be conducted in the Superior Court of the State of
California in and for San Mateo County or the United States
District Court for the Northern District of California. Each of
the parties consents to the exclusive jurisdiction of such courts
and to venue in such courts.
13.15. Export Restrictions. M-Systems will not export or re-export the
Migo Products, any part thereof, or any process or service that is
the direct product of the Migo Products (the foregoing
collectively referred to as the "Restricted Components") to any
country, person or entity subject to U.S. export restrictions.
M-Systems specifically agrees not to export or re-export any of
the Restricted Components (i) to any country to which the U.S. has
embargoed or restricted the export of goods or services, which
currently include, but are not necessarily limited to Cuba, Iran,
Iraq, Libya, North Korea, Sudan and Syria, or to any national of
any such country, wherever located, who intends to transmit or
transport the Restricted Components back to such country; (ii) to
any person or entity who you know or have reason to
Page 15
know will utilize the Restricted Components in the design,
development or production of nuclear, chemical or biological
weapons; or (iii) to any person or entity who has been prohibited
from participating in U.S. export transactions by any federal
agency of the U.S. government. M-Systems warrants and represents
that neither the U.S. Bureau of Export Administration nor any
other U.S. federal agency has suspended, revoked or denied its
export privileges.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their
duly authorized representatives as of the Agreement Date.
M-Systems Flash Disk Pioneers Ltd. PowerHouse Technologies Group, Inc.
By:__________________ By:__________________
Its:_________________ Its:_________________
Date:________________ Date:________________
EXHIBITS
Exhibit A - M-Systems Technology
Exhibit B - PowerHouse Technology
Exhibit C - Product Development Plan
Exhibit D - License/Referral Fee Report
Exhibit E - Escrow Agreement
Exhibit F - Exclusivity Exceptions
Page 16
EXHIBIT A - M-SYSTEMS TECHNOLOGY
EXHIBIT B - POWERHOUSE TECHNOLOGY
--------------------------------------------------------------------------------
TRADEMARKS
--------------------------------------------------------------------------------
Trademark Reg. Date Reg. No.
--------------------------------------------------------------------------------
MIGO Filed on August 18, 2003 Application No.
78/288,619
(applicant:
Forward
Solutions, Inc.)
--------------------------------------------------------------------------------
POCKETLOGIN September 17, 2003 78/219,213
(applicant:
First Person
Software, Inc.)
--------------------------------------------------------------------------------
PATENTS
--------------------------------------------------------------------------------
Title Date Issued Patent No.
--------------------------------------------------------------------------------
System and Filed May 8, 2003 by ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Serial No.
method for and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ 10/435,070
transferring
personalization
information
among computer
systems.
--------------------------------------------------------------------------------
COPYRIGHTS
--------------------------------------------------------------------------------
None.
--------------------------------------------------------------------------------
EXHIBIT B
Page 1
EXHIBIT C - PRODUCT DEVELOPMENT PLAN
SEE MRD
EXHIBIT C
Page 1
EXHIBIT D - LICENSE/REFERRAL FEE REPORT
EXHIBIT D
Page 1
EXHIBIT E - ESCROW AGREEMENT
EXHIBIT E
Page 1
EXHIBIT F - EXCLUSIVITY EXCEPTIONS
[*]
EXHIBIT E
Page 2